Housing Numbers: Green Shoots or Red Flags?

Two new pieces of data out today suggest, at face value at least, an improvement in the housing market.
First, construction spending rose 0.3 percent in March. Now granted, that's not an awful lot, but it's the first time that number has been positive in six months. The trouble is, single family construction dropped 8.6 percent after falling a record 11 percent in February. Nonresidential construction, however, came in strong and actually unexpectedly strong.
Okay, great then about nonresidential, except that the gains came in commercial buildings, educational buildings and manufacturing, which are all overbuilt already for today's real estate climate. "March's gains were likely from ongoing projects that were started when the outlook was brighter than it is today," writes economist Patrick Newport of IHS Global Insight.
Of course on the bright side, you could argue that continued drops in residential construction spending is a good thing for the market, given how high new home inventories are right now. The less we build, the faster we get back to normal levels of supply and demand. That's the bright side, if you are not actually a home builder.
The second piece of data, Pending Home Sales from the National Association of Realtors, also came in higher than expected. An increase of 3.2 percent month to month in contracts signed for existing homes could signal a coming boost in existing home sales. Of course, "while pending home sales have historically been a one-month leading indicator to existing home sales, with a 71% correlation using a one-month lag," writes JP Morgan analyst Michael Rehaut, "we note that since October, the relationship has been more volatile. Specifically, Feb.’s Pending Home Sales rose 2.0%, but March Existing Home Sales fell 3.0%." Rehaut adds that rising unemployment and weak consumer confidence will keep these levels depressed through the year.
Most agree that the increase in demand is driven by continued demand for foreclosures, a huge increase in affordability, low mortgage rates and the $8000 first time home buyer tax credit. Credit-Suisse analyst Dan Oppenheim in looking for a correlating rise in existing home sales in April, based on these pending numbers, a 3.9 percent increase to be precise. Since the largest gains appear to be in the South and West (homes to your biggest boom and bust states), we can probably expect to see even a bigger percentage of sales coming from foreclosures or short sales. And that's not bad.
The faster we get rid of the distressed inventory, the faster we can get regular, higher-priced homes some action.

Pricing to Sell!

Want to get top dollar for your home?
Despite the fact that declining home prices have been grabbing headlines for several months now, it can be a challenge for any of us to let go of what we had hoped our home would sell for.
It’s often the case that, prior to listing their homes, sellers interview a few agents, with a plan to sign on with the one who agrees to list it at the highest price. With the understanding that the listing price is ultimately the decision of the seller, not the real estate agent, I’d like to explain one of the most critical dynamics that impacts the actual sales price of a home.
Whether we are in a buyer’s market or a seller’s market, the same principle applies. The most effective pricing strategy for getting top dollar for a home is to price it competitively. This might not seem to make sense at first, but study after study, as well as my own personal experience, has proven that when a competitively priced home hits the market, it generates an instant buzz. Agents begin calling their prospective buyers and lining up showings to ensure that they don’t miss out on a great buy. Bidding wars can even break out.
Let’s contrast this situation to what happens when a home is priced higher than comparable properties. Neighbors and prospective buyers take one look at the listing sheet, and dismiss it as overpriced. The home sits on the market and sits some more. Eventually “REDUCED PRICE!” signs go up. The market starts to wonder what’s wrong with the house since it hasn’t sold.
Eventually, sellers take it off the market or agree to sell it for a much lower price than they had originally hoped.
In any market, competitively priced homes sell quicker and command a higher selling price than homes that factor high hopes into the pricing equation.